Digital Currency like bitcoin Ethereum a Tailwind for AMD Stock?
After spending the better part of its life ter Intel Corporation’s (NASDAQ:INTC) shadow, Advanced Micro Devices, Inc. (NASDAQ:AMD) exploded te value last year.
What is behind AMD’s soaring valuation, and will it proceed through 2018?
One part of the story is AMD’s “IP monetization.” Don’t let the term scare you—it is just a fancy way of telling that companies pay AMD for the right to copy its patented designs.
The other part of the story is Bitcoin, or at least cryptocurrencies like Bitcoin.
Digital currencies don’t mededeling out of lean air—they are “mined” by powerful computers. Thesis computers spend time solving ingewikkeld puzzles, and with each solved puzzle, fresh tokens are awarded to the user.
Waterput another way, cryptocurrencies are “mined” using mathematics.
It takes a lotsbestemming of computing power to crack thesis mathematical codes, but doing so can pay off big time. We’ve all heard tales of early Bitcoin miners who took possession of their BTC tokens at $Three.00 or $Four.00. It is now trading at $Two,823.
Such extreme growth numbers leave most investors salivating. It leaves mij wondering how thesis “mining” equipments are set up.
After all, there is hardware behind all software, and if you can find a company that manufactures the necessary parts for a mining equipment, you’ve effectively found another way to profit from the popularity of digital currency.
Ethereum and AMD’s Radeon Chips
Graphics cards? What are you talking about?
I get that reaction all the time. Bear with mij.
Ethereum uses similar technology to Bitcoin, but its goals are entirely different.
Bitcoin wants to demolish fiat currencies and central banks, whereas Ethereum is looking to streamline business functions. For example, Ethereum’s “smart contracts” help reduce friction te almost any area of business, not just te payments.
We’ve seen enormous uptake ter thesis brainy contracts, particularly te Russia, where they are being used by government agencies and major corporations.
A loterijlot of people (myself included) believe that Ethereum’s goals are more acheivable than Bitcoin’s, which is why ETH prices soared this year. It wasgoed trading at $Ten.07 ter early January, six months straks, it is trading close to $400.00.
Cryptocurrencies require a little effort to wrap your head around, but considering that their upside potential opens up into five figures, they are worth the effort.
Without getting too technical, here’s a quick chart explaining why graphics cards are useful to elaborate functions like Ethereum mining, artificial intelligence, or driverless car technology.
There are simply more “cores” te a graphics processing unit, or GPU, than ter a CPU.
Spil a result, the information can be split into smaller clumps and organized more creatively, which translates into greater computational power.
So cryptocurrency miners buy themselves a equipment, voorkant the violet wand costs, and mint their own money. It is the omschrijving of having a printing press te your house.
People are more habitual to this idea than they were a few years ago. I now meet finance professionals that are setting up their mining equipments, whereas a few years ago, the mining community wasgoed exclusively predominated by engineers and coders.
We’re witnessing the idea float up into the public consciousness.
Spil it does, request for GPUs is trussed to rise, and companies like AMD will likely reap the prizes.
Other Reasons for AMD Stock’s Ascent
To be fairly fair, AMD wasgoed te the right place at the right time.
Rising request for GPUs vaulted the rock-hard to unprecedented heights, and a stroke of luck should be acknowledged spil precisely that—luck.
It is sheer coincidence that Moore’s Law deteriorated around the same time spil thesis tech trends emerged:
- Artificial Intelligence
- Driverless Cars
None of thesis words were ter the public lexicon a decade ago, yet all of them require more GPUs. Self-driving cars, for example, are expected to become an $87.0-billion market by 2030, meaning that an enormous amount of hardware is needed to scale up.
Spil a graphics chip maker, AMD wasgoed (and is) ideally placed to surf this trend. I see the share price continuing its upward trajectory through this year and the next.
On a less accidental note, I’m bullish on the company’s decision to license patents te China.
It wasgoed a master stroke, especially when you consider that China is often closed to U.S. tech companies. Local partnership is the only way ter.
That is the beauty of IP monetization. It subtracts the headache of manufacturing, while adding a ton of revenue. Who would say no to that?
Just take a look at AMD’s snaak venture with Tianjin Haiguang Advanced Technology Investment Co., Ltd. (THATIC).
AMD gains $293.0 million from the overeenkomst, simply by lending its expertise on server chips ($52.0 million te the very first year of the overeenkomst). THATIC manufactures the chips and leverages its existing relationships within China. Sounds like a match made te heaven to mij. (Source: “AMD announces x86 licensing overeenkomst, $293 million snaak venture to build servers for China,” ExtremeTech, April 22, 2016.)
Like Warren Buffett and Jongste Graham, I believe the best investments are the ones you can hold for Ten, 20, even 30 years.
AMD has (against all odds) become one of thesis investments.
It is now a “cutting edge” microchip maker with growing market share. The company’s accidental ascension is likely to proceed spil long spil thesis trends hold constant, so I’m ready to remain bullish on AMD stock for the foreseeable future.